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SC Issues Notice on GST Liability of Cross-LoC Barter Trade

Case Law Details

TaxGuru Citation
2026 taxguru.in 13533
Case Name
Nee Gee Enn & Sons Vs Union of India & Ors. (Supreme Court of India)
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Nee Gee Enn & Sons Vs Union of India & Ors. (Supreme Court of India)

The dispute concerns Cross-LoC barter trade conducted on the Srinagar-Muzaffarabad and Poonch-Rawalakote routes pursuant to the Confidence Building Measures between India and Pakistan and the Standard Operating Procedure issued by the Government of India on 20th October 2008. The arrangement permitted specified goods to be exchanged between traders on the two sides of the Line of Control without exchange of currency. Under the earlier J&K VAT regime, Cross-LoC trade was treated as zero-rated. After introduction of GST in Jammu & Kashmir with effect from 8th July 2017, however, there was no corresponding provision expressly continuing that treatment.

The GST authorities investigated Cross-LoC transactions undertaken during 2017-18 and 2018-19 and alleged that the traders had neither disclosed the inward and outward supplies in their GST returns nor discharged GST. Show cause notices were consequently issued under Section 74(1) of the CGST Act, 2017 read with the J&K GST Act. The traders approached the Jammu & Kashmir High Court under Article 226 contending principally that the notices lacked jurisdiction.

In New Gee Enn & Sons Vs Union of India & Ors., the High Court examined six questions concerning the nature of Cross-LoC trade, applicability of Sections 73 and 74, limitation, clubbing of financial years, taxation of barter transactions and availability of the statutory appellate remedy.

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Author Info

CA Sandeep Kanoi
Qualification: Graduate, CA in Job / Business, DD
Company: Taxguru Consultancy
Location: Mumbai, Maharashtra
Articles Published: 24,188

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